162. S. 10 (23C) : Educational institution – Medical university – Statement of accountant of a promoter / sponsor – Books of account – Refusal of registration and approval under section 80G is held to be not valid [ S. 10(23)(vi), 12AA, 80G (5)(vi)]

Assessee, a medical university, created under State Act, had filed an application seeking approval under section 80G(5)(vi) and exemption under section 10(23C) .It had a sponsor/promoter which was a public medical charitable trust . On the basis of statements made by accountant of the sponsor the exemption was denied. Tribunal allowed the exemption. On appeal High Court affirmed the order of the Tribunal.

CIT v. Pacific Medical University (2022) 137 taxmann.com 207 (Raj.)(HC)

Editorial: SLP of Revenue dismissed, CIT (E) v. Pacific Medical University (2022) 286 Taxman 358 (SC)

163. S.10B : Export oriented undertakings – Agreement with Central Government – Ministry of Commerce granting hundred percent export oriented unit – Entitle to exemption – Exemption cannot be denied merely on the ground that the assessee has not claimed exemption in return of income. [S. 10A, 139, Industrial (Development & Regulation) Act, 1951 S. 14]

Assessing Officer denied benefit of exemption under section 10B on ground that assessee was not approved by concerned statutory Board as a hundred per cent export oriented undertaking as required under Explanation to section 10B of the Act. Commissioner (Appeals) allowed appeal. On revenue’s appeal, Tribunal referred that an agreement was entered into between assessee and Central Government wherein there was a reference to a resolution passed by Ministry of Commerce granting status of hundred per cent export oriented unit to assessee . Further CBDT had issued a clarification dated 9-3-2009 to effect that power to grant approval under section 14 of Industrial (Development & Regulation) Act, 1951 had been delegated to Development Commissioner and approval granted by Development Commissioner shall be considered valid for purpose of exemption under section 10B. Affirmed the order of CIT (A) . On appeal High Court affirmed the order of Tribunal. The assessee had not claimed exemption under section 10A in its return of income, however, Tribunal after examining the factual matrix and pointed out similarities between section 10A and section 10B and after taking note of legal position came to conclusion that assessee was entitled to relief under section 10B and was also entitled for benefit of exemption under section 10A of the Act. Tribunal also held. Revenue cannot take advantage of assessee’s mistake in not claiming exemption in return of income, thereby denying exemption. On appeal High Court affirmed the order of Tribunal. (AY. 2007- 08, 2008-09)

PCIT v. Wizard Enterprises (P.) Ltd. (2022) 286 Taxman 112 (Cal)(HC))

164. S. 12AA: Procedure for registration – Trust or institution – Cancellation of registration is not valid on the ground which was not contained in show cause [S. 115BBC]

Dismissing the appeal of the Revenue the Court held that cancellation of registration is not valid on the ground which was not contained in show cause notice. Order of Tribunal is affirmed.

CIT v. Guru Nanak Education Trust (2022) 286 Taxman 350 (Cal)(HC)

165. S. 12AA : Procedure for registration – Trust or institution- Educational institution – Failure to file return – Matter was remanded back to file of Commissioner (E) with direction to grant registration under section 12A if objectives and activities of assessee were found to be same – Order of Tribunal [S.12A]

Assessee, an educational institution, had filed an application before Commissioner (E) seeking registration under section 12A of the Act. Commissioner (E) rejected the application of on ground that assessee had not filed return of income and had not obtained permission from Central Board of Direct Taxes while earning income abroad and, thus, it had violated provisions of Act. Tribunal held that for next assessment year 2020-21, assessee had been granted registration by Commissioner (E) under section 12A and remanded matter back to file of Commissioner (E) with direction to grant registration under section 12A if objectives and activities of assessee were found to be same. On appeal High Court affirmed the order of the Tribunal. (AY. 2019-20)

PCIT v. Jawaharlal Nehru Technological University. (2022) 286 Taxman 231 (Telangana)(HC)

166. S.14A : Disallowance of expenditure – Exempt income – Failure to record satisfaction – Invoking rule 8D is not justified – Disallowance proposed by the assessee is affirmed [R. 8D]

Held that where Assessing Officer failed to record its satisfaction with regard to claim of assessee that it had incurred any expenses in earning exempt income the disallowance under section 14A by invoking rule 8D made by Assessing Officer was unjustified, however, disallowance to extent of Rs. 1.61 lakhs which was proposed by assessee itself was up held. (AY. 2009-10)

Essilor India (P) Ltd v. Dy. CIT (2022) 286 Taxman 385 (Karn.)(HC)

167. S. 14A: Disallowance of expenditure – Exempt income – Only expenses proportionate to earning of exempt income could be disallowed [R. 8D]

Dismissing the appeal of the Revenue the Court held that only expenses proportionate to earning of exempt income could be disallowed. (AY. 2011 – 12)

PCIT v. Karnataka State Financial Corporation Ltd. (2021) 127 taxmann.com 115 (Karn)(HC)

Editorial : Notice issued in SLP filed against order of High Court, PCIT v. Karnataka State Financial Corporation Ltd. (2022) 286 Taxman 356 (SC)

168. S. 14A : Expenditure incurred in relation to exempt income- Although Section 14A is retrospective reopening cannot be made w.e.f 1-4-2001 and revision cannot be made when there is no expenditure incurred in relation to exempt income[S. 2(22)(e) of the Income tax Act, 1961]

Revision under Section 263 can only be made when the order of the AO is erroneous or prejudicial to the Revenue. When revision was ordered to be carried out by the AO, by the revisional authority, even though no expenditure was incurred in relation to exempt income, and the revisional authority ought to have stated atleast prima facie what the expenditure was, the revisional order is not sustainable and the appeal is to be dismissed.(T.C.A. No. 421 of 2012 decided on 2.8.2021)(AY: 2002-2003)

CIT v. Accel Limited [2022] 446 ITR 47 (Mad)(HC)

169. S. 32: Depreciation – Claim of depreciation as permissible – Deletion of disallowance was proper.

Assessing Officer disallowed claim of depreciation on premise that assessee had made a double claim as depreciation for relevant assessment years was claimed separately under head ‘Social Overhead’ over and above depreciation already claimed under section 32 of the Act. Tribunal held that depreciation claimed in profit and loss account was depreciation claimed as per Companies Act, 1956 and was claimed by providing relevant depreciation schedule which was given as annexure to computation of total income and the assessee had added back depreciation as per profit and loss account and thereafter claimed depreciation which is permissible under section 32 of the Act. On appeal High Court affirmed the order of Tribunal](AY. 2003-04, 2004-05, 2005-06)

PCIT v. Eastern Coalfields Ltd. (2022] 286 Taxman 487 (Cal)(HC)

170. S.35DDA: Amortisation of expenditure – Voluntary retirement scheme – Accrued liability – Allowable as deduction [S. 43(2), 145]

The assessee implemented a Voluntary Retirement Scheme (VRS) for its employees. Liability towards compensation for employees covered under VRS worked out to Rs. 12.83 crores the said amount was amortized over a period of 60 months started from accounting year 2000-01 and this was reflected in balance sheet as at 31-3-2001. During assessment year 2001-02 assessee claimed deduction of Rs. 2,56,70,399, i.e., one-fifth of aforesaid amount of Rs. 12.83 crores. Assessing Officer disallowed claim of deduction of Rs. 2,56,70,399 and only allowed actual payment made during assessment years 2001-02, i.e., Rs. 17,22,059 and balance amount was treated as contingent liability on ground that what could not be ascertained or quantified could not be treated as expenditure. Commissioner (Appeals) affirmed order of Assessing Officer holding amortization of accrued liability as capital expenditure. Tribunal concurred with view of Commissioner (Appeals) that only amount paid during year had to be taken into consideration and not entire amount payable under VRS . On appeal the Court held that in view of definition of ‘paid’ under section 43(2) that contemplates an accrual liability Tribunal erred in treating liability under VRS not as an accrued one but in proceeding on basis that only amount actually paid during assessment year 2001-02 could be allowed. Order of lower authorities are set aside. (AY. 2001-02)

Tata Refactories Ltd v. CIT (2022) 286 Taxman 577/ 213 CTR 405/ 326 CTR 469 (Orissa)(HC)

171. S.37(1): Business expenditure – Buyback of shares – Amount over and above face value of shares to departing group of shareholders – Allowable as revenue expenditure [S. 263]

Dismissing the appeal of the Revenue the Court held that held that in terms of directions issued

by CLB, assessee-company paid certain amount over and above face value of shares to departing group of shareholders, amount so paid was to be allowed as revenue expenditure. Followed CIT v. Bramha Bazar Hotels Ltd (2015) 235 Taxman 195 (Bom)(HC) (AY. 2007-08)

PCIT v. Bramha Corp Hotels and Resorts Ltd (2022) 136 taxmann.com 398( Bom)(HC)

Editorial : SLP filed against order of High Court was to be dismissed as withdrawn. PCIT v. Bramha Corp Hotels and Resorts Ltd. (2022) 286 Taxman 265 (SC)

172. S.37(1): Business expenditure – Buyback of shares- Amount over and above face value of shares to departing group of shareholders – Allowable as revenue expenditure [S. 263]

Dismissing the appeal of the Revenue the Court held that held that in terms of directions issued by CLB, assessee-company paid certain amount over and above face value of shares to departing group of shareholders, amount so paid was to be allowed as revenue expenditure. Followed CIT v. Bramha Bazar Hotels Ltd (2015) 235 Taxman 195 (Bom)(HC) (AY. 2007-08)

PCIT v. Bramha Corp Hotels and Resorts Ltd (2022) 136 taxmann.com 398(Bom)(HC)

Editorial: SLP filed against order of High Court was to be dismissed as withdrawn. PCIT v. Bramha Corp Hotels and Resorts Ltd. (2022) 286 Taxman 265 (SC)

173. S.37(1): Business expenditure – Amount paid represented fee for participation in training programmes – Allowable as business expenditure [40A(9)]

Indian Institute of Coal Management (IICM) conducted education and training programmes for different corporate bodies in general and companies in coal sector in particular. Employees of assessee-company participated in management and technical development programmes, workshops and seminars conducted by IICM with a view to improve their skills and expertise against huge sum/certain fee which was shown under head ‘Miscellaneous expenses’. Assessing Officer held that contribution to IICM was sum paid by assessee as an employer which was not allowable under section 40A (9) of the Act. On appeal CIT(A) affirmed the order of Assessing Officer. on further appeal the Tribunal held that payment made by assessee-company represented fee for participation in training programmes, organised by IICM and contribution made by assessee- company towards training had direct nexus with nature of business of assessee and, therefore, it was allowable as expenditure wholly and exclusively for purpose of business of assessee, since sum paid to IICM was crystalised as liability of assessee during relevant previous year, said sum, was revenue expenditure incurred for training of employees/executives and was not hit by provisions of section 40A(9) of the Act. Order of Tribunal is affirmed by the High Court. (AY. 2003-04, 2004-05, 2005-06)

PCIT v. Eastern Coalfields Ltd. (2022] 286 Taxman 487 (Cal)(HC)

174. S.43B: Deductions on actual payment – Loan from its two promoters, Government of TamilNadu and IL&FS- Public financial institutions – Matter remanded to Assessing Officer. [S. 254(1)]

Tribunal allowed assessee’s claim on ground that promoters were not covered by definition of ‘public financial institution’ as per Explanation 4 to section 43B and thus, provisions of section 43B(d) read with Explanation 3C would not be attracted in assessee’s case where interest

liability was accrued but not paid. Court held that since Tribunal had not verified whether IL&FS was a public financial institution or not and merely held that both promoters were not covered under definition of ‘public financial institutions’, orders were to be set aside and matter was to be remanded to Assessing Officer. (AY. 2003-04 to 2011-12)

CIT v. Tamil Nadu Water Investment Co. Ltd. (2022) 286 Taxman 600 (Mad.)(HC)

175. S.43B: Deductions on actual payment – Employees’ and employers contribution – Paid before due date of filing of return Allowable as deduction [S. 139(1)]

Dismissing the appeal of the Revenue the Court held that both employees’ and employer’s contributions are covered under amendment provided by Finance Act, 2003 to section 43B, thus, payments thereof were subject to benefits of section 43B and were to be allowed as deductions . Order of Tribunal affirmed. Followed CIT v. Ghatge Patil Transports Ltd (2014) 368 ITR 749 (Bom) (HC). (AY. 2007-08)

PCIT v. Bramha Corp Hotels and Resorts Ltd (2022) 136 taxmann.com 398 (Bom)(HC)

Editorial: SLP filed against order of High Court was to be dismissed as withdrawn. PCIT v. Bramha Corp Hotels and Resorts Ltd. (2022) 286 Taxman 265 (SC)

176. S.43B: Deductions on actual payment – Statutory corporation – Obligation of agent to account for and pay amounts collected by him on behalf of principal is purely fiduciary- Disallowance is not valid [Electricity Supply Act, 1948, S. 5]

Amount remained in hands of assessee till date of assessments, Assessing Officer treated said

amount as income. On appeal High court held that liability to pay and corresponding authority of State to collect tax (flowing from a Statute) is essentially in realm of rights of sovereign, whereas obligation of agent to account for and pay amounts collected by him on behalf of principal is purely fiduciary hence, section 43B could not be invoked for making assessment of liability of assessee-corporation under Act with regard to amount collected by it as an agent of State towards tax payable by consumers of electricity to State. Followed Kerala State Electricity Board v. Dy.CIT (2010) 329 ITR 91 /(2011) 196 taxman 1 (Ker)(HC) (AY. 2006-07 to 2009-10)

PCIT v. Kerala State Electricity Board (2022) 137 taxmann.com 85 (Ker)(HC)

Editorial: Notice issued in SLP filed by Revenue, PCIT v. Kerala State Electricity Board. (2022) 286 Taxman 438 (SC)

177. S.43B: Deductions on actual payment – Service tax – Deduction available on actual payment.

Dismissing the appeal of the Revenue the Court held that Service tax deduction could be granted only upon actual payment and not on accrual as is provided under section 43B of the Act. (AY. 2013-14)

PCIT v. Zuberi Engineering Co. (2022) 286 Taxman 686 (Raj)(HC)

178. S. 45 : Capital gains Full value of consideration – Deductions Consideration on sale shares including sum held in Escrow Account offered to tax – Receiving reduced sum from Escrow Account after Completion of assessment – Whole amount credited in book not taxable as capital gains – Only actual amount received taxable – Entitled to refund of excess tax paid – Recomputation can be less than the returned income – Proviso to section 240 is not applicable – The assessee can be asked to pay only such amount of tax which is legally due under the Act and noting more – Entitle to refund of excess tax paid [S. 48, 264, Art. 226]

The assessee computed the capital gains on sale of shares taking into account the proportion of the total consideration which included the escrow amount which had not been received by the time returns were filed but were received by the promoters but were still parked in the escrow account. The income declared by the assessee was accepted in the scrutiny assessment. The assessee stated that subsequent to the sale of the shares certain statutory and other liabilities arose for the period prior to the sale of the shares and according to the agreement, certain amount was withdrawn from the escrow account and it did not receive the amount. The assessee filed an application under section 264 before the Principal Commissioner and submitted that the capital gains were to be recomputed accordingly reducing the proportionate amount from the amount deducted from the escrow account and that an application under section 264 was filed since the assessment had been completed by the time the amount was deducted from the escrow account.

The Principal Commissioner rejected the assessee’s application. On writ allowing the petition the Court held that that capital gains was computed under section 48 of the Act by reducing from the full value of consideration received or accrued as a result of transfer of capital asset, cost of acquisition, cost of improvement and cost of transfer. The real income (capital gains) could be computed only by taking into account the real sale consideration, i. e., sale consideration after reducing the amount withdrawn from the escrow account. The amount was neither received nor accrued since it was transferred directly to the escrow account and was withdrawn from the escrow account. When the amount had not been received or accrued it could not be taken as full value of consideration in computing the capital gains from the transfer of the shares of the assessee. The purchase price as defined in the agreement was not an absolute amount as it was subject to certain liabilities which might have arisen on account of certain subsequent events. The full value of consideration for computing capital gains would be the amount which was ultimately received after the adjustments on account of the liabilities from the escrow account as mentioned in the agreement. The liability as contemplated in the agreement should be taken into account to determine the full value of consideration.

Therefore, if the sale consideration specified in the agreement was along with certain liability, then the full value of consideration for the purpose of computing capital gains under section 48 of the Act was the consideration specified in the agreement as reduced by the liability. The full value of consideration under section 48 would be the amount arrived at after reducing the liabilities from the purchase price mentioned in the agreement. Even if the contingent liability was to be regarded as a subsequent event, it ought to be taken into consideration in determining the capital gains chargeable under section 45. Such reduced amount should be taken as the full value of consideration for computing the capital gains under section 48. If income did not result at all, there could not be a tax, even though in book keeping, an entry was made about hypothetical income which did not materialize. Therefore, the Principal Commissioner ought to have directed the Assessing Officer to recompute the assessee’s income irrespective of whether the computation would result in income being less than the returned income. CIT v. Shoorji Vallabhdas and co.(1962) 46 ITR 144 (SC), relied.

Court also held that reliance by the Principal Commissioner on the provisions of section 240 to hold that he had no power to reduce the returned income was erroneous because the circumstances provided in the proviso to section 240 did not exist. The proviso to section 240 only provides that in case of annulment of assessment, refund of tax paid by the assessee according to the return of income could not be granted to the assessee. The only thing that was sacrosanct was that an assessee was liable to pay only such amount which was legally due under the Act and nothing more. Therefore, the assessee was entitled to refund of excess tax paid on the excess capital gains. (AY.2011-12)

Dinesh Vazirani v. PCIT (2022) 445 ITR 110 (Bom) (HC)

179. S. 45 : Capital gains – Transfer – Immovable property – Unregistered agreement – Joint development agreement – Payment from developer – Not assessable as capital gains [S. 2(47)(v), Transfer of Property Act, 1882, 53A]

During assessment year under an unregistered agreement the assessee received certain payment from developer of property. The Assessing Officer held that the assessee has handed over the possessing of property to developer and assessed the amount as capital gains. Commissioner (Appeals) held that full amount payable under agreement had accrued to assessee in assessment year 2009- 10 hence affirmed the order of the Assessing Office. Tribunal held that after amendment to section 53A of Transfer of Property Act, 1882 which was amended by Amendment Act, 2001 which stipulates that if an agreement like joint development agreement is not registered then it shall have no effect in law for purposes of section 53A of the Act. Accordingly deleted the addition.

On appeal High Court held that in light of law laid down by Supreme Court in case of CIT v. Balbir Singh Maini (2017) 398 ITR 531/ 251 Taxman 202 (SC) to effect that if development agreement is not registered it shall have no effect in law for purposes of section 53A which bodily stood incorporated in section 2(47)(v) of the Act. Accordingly the Tribunal was right in allowing assessee’s appeal and granting relief. (AY. 2009-10)

PCIT v. Shelter Project Ltd.( 2022) 445 ITR 291/ 286 Taxman 392 (Cal)(HC)

180. S. 48 : Capital gains – Sale consideration – Fair market value deemed to be full value of consideration in certain shares – Transfer of a plot of land – Joint Development agreement – Not ascertainable – Guidance value of land would be appropriate mode to determine full value of consideration – Provision of section 50D came in to force with effect from 1-4-2013 is not applicable for the year under consideration. [S. 45, 50D]

The assessee was entitle to receive 26% of the constructed area as per the terms of the JDA . The Assessing Officer computed the long term capital gains qualifying the consideration as the cost of consideration of 26% of the constructed area and allotted to the assessee as per the JDA dated 11-5 -2009 treating the cost of construction as the full value of consideration. On appeal the CIT (A) held that the guidance value as the full value of consideration, which was affirmed by the Tribunal. On appeal by the Revenue the Court held that when the consideration is not ascertainable, guidance value of land would be appropriate mode to determine full value of consideration. Court also held that provision of section 50D came in to force with effect from 1-4-2013 is not applicable for the year under consideration. Appeal of Revenue was dismissed. (AY. 2006-07, 2010-11)

PCIT v. CPC Logistics Ltd (2022) 286 Taman 38 (Karn)(HC)

181. S. 68: Cash credits – Reconciliation of statement – Supported by evidence – Order of Tribunal was affirmed. [S. 260A]

Dismissing the appeal of the Revenue the Court held that Tribunal re-examined entire facts and in particular reconciliation statement filed by assessee and found that reconciliation and explanation was duly supported by evidence which were on record. (AY. 2006-07)

PCIT v. AHW Steels Ltd. (2022) 286 Taxman 330 (Cal)(HC)

182. S. 68: Cash credits – Unsecured loans – Established genuineness and credit worthiness – Deletion of addition was justified.

Dismissing the appeal of the Revenue the Court held that the assessee has established genuineness and credit worthiness of the lenders. Deletion of addition was justified. (AY. 2004-05 to 2010-11)

PCIT v. Inland Road Transport Ltd. (2022) 286 Taxman 613 (Cal)(HC)

183. S. 68 : Cash credits – Shares of Raj Darbar Group brought back the shares at much lower rate at which the shares were allotted – Addition was made not on the basis of seized materials or statements – Deletion is held to be justified [S. 132, 153C]

Proceedings under section 153C were initiated against assessee. During post-search enquiries, it was gathered that 25 companies applied and allotted shares of assessee-company and later family members/companies of Raj Darbar group bought back shares at a much lower price. Assessing Officer treated amount received from companies as unexplained cash credit under section 68 of the Act. on the basis of extensive enquiries made by Investigation Wing.

On appeal the Tribunal held that the Assessing Officer had not made use of any seized documents while making additions to total income of assessee under section 68 and on other hand, had used extensive enquiries made by Investigating Wing, as basis to make said addition, since no seized material or statement had been relied upon by Assessing Officer while making addition the addition deleted. High Court affirmed the order of the Tribunal. Relied on CIT v. Kabul Chawla (2015) 234 Taxman 300/ (2016) 380 ITR 573 (Delhi)(HC) (AY. 2003-04)

PCIT v. Vikas Telecom Ltd. (2022) 286 Taxman 238/ 209 DTR 373/ 324 CTR 341 (Delhi)(HC)

184. S. 69: Unexplained investments – Recorded in the books of account – Deletion of addition is held to be

Dismissing the appeal of the Revenue the Court held that the investment was financed by bank which was explained at stage of assessment and recorded in account books. Order of Tribunal affirmed. (AY. 2004-05 to 2010-11)

PCIT v. Inland Road Transport Ltd. (2022) 286 Taxman 613 (Cal)(HC)

185. S. 69: Unexplained investments – Search and Seizure – Seizure of Jewellery – Consignee – Payments were accounted – Addition was held to be not justified- Directed to release of seized jewellery. [S. 132, 153C, Art. 226]

The assessee is in the business of Gold Jewellery – During search conducted at premises of

one Shri Suresh Kumar it was found that a consignor, one Parva Kundan & Diamonds PvtLtd. dispatched a package containing gold jewellery weighing 524.500 gms which was to be received by assessee as consignee. Said gold jewellery was seized. The Assessing Officer initiated proceedings under section 153C and made additions in assessee’s income for seized value of gold jewellary by treating same as unaccounted investment .On writ against the said order the Court held that the assessee purchased said gold from Parva Kundan & Diamonds Pvt Ltd for which payment was made through banking channels and purchases were duly accounted for in books of account of assessee. Accordingly said purchases could not be termed as unaccounted investments and seized gold jewellery was directed to be released in favour of assessee. (AY. 2018-19)

Rakeshkumar Babulal Agarwal v. PCIT (2022) 286 Taxman 617/213 DTR 15 (Guj)( HC)

186. S. 69B : Amounts of investments not fully disclosed in books of account – Stock – Value of stock shown in stock statement as on 28-3-2005 submitted to bank was far in excess to value of stock shown in audit report for period ending 31-3-2005 – No explanation was offered – Order of Tribunal was affirmed. [S.145]

Assessee was engaged in manufacturing and trading of edible oils and grains . Assessing Officer found that value of stock shown by assessee in stock statement as on 28-3-2005 submitted to bank was far in excess to value of stock shown in audit report for period ending 31-3-2005 and difference was to extent of Rs. 2.71 crores and assessee despite opportunity afforded could not either reconcile difference or explain reasons therefor, treated difference amount as unexplained investment in stock from undisclosed sources and added same to total income of assessee under section 69B of the Act. Commissioner (Appeals) deleted the addition by referring to a chart indicating stock position as on 28-3-2005 submitted to bank with stock position as per stock register on 28-3- 2005.

Tribunal held that assessee was bound to explain difference either before Assessing Officer or before Commissioner (Appeals) or before Tribunal and same was not done. Tribunal held that once it was found by Assessing Officer that there was excess stock, in absence of explanation by assessee, conclusion was inescapable that excess stock, if any, was from undisclosed sources. Order of Tribunal is affirmed. (AY. 2005 -06)

Suraj Bhan Oil (P.) Ltd. v. DCIT (2022) 286 Taxman 680 (MP)(HC)

187. S.69C: Unexplained expenditure – Whether findings of Tribunal can be interfered with when there is no question of law or perversity in factual findings

If the Tribunal upholds the CIT (A)’s order to restrict gross profit to 2.5% of turnover as the assessee could not produce certain documents owing to there being a flood in Chennai and is reasonable then there is no substantial question of law and no interference is called for in the order of the tribunal (T.C.A. No. 103 of 2022 decided on 8.6.2022)(AY: 2014-2015)

Ankit Ispat (P.) Ltd. v. ACIT [2022] 446 ITR 157 (Mad)(HC)

188. S. 80IA : Industrial undertakings – Infrastructure development – Electricity distribution – Expenditure on network of a new transmission or distribution line- No requirement of capitalization of said expenditure in books of account – Deduction allowable [S.800IA(4)(iv)]

The assessee, a power distribution company, had incurred expenditure on network of a new transmission or distribution line. Allowing the appeal of the assessee the Court held that there was no requirement of capitalization of said expenditure in books of account so as to claim deduction under section 80-IA(4)(iv) of the Act. Followed Bangalore Electricity Supply Company Ltd. v. Dy. CIT (20021) 431 ITR 606 (Karn)(HC) (AY. 2006-07)

Mangalore Electricity Supply Company Ltd. v. Dy. CIT (2022) 136 taxmann.com 428 (Karn.)(HC)

Editorial : Notice issued in SLP filed against the order of High Court , Dy. CIT v. Mangalore Electricity Supply Company Ltd. (2022) 286 Taxman 566 (SC)

189. S. 92C : Transfer pricing – Arm’s length price – Foreign comparable – Guidance note by ICAI and transfer pricing guidelines issued by OECD do not prohibit foreign AE to be a tested party – Foreign AE could be selected as a tested party- Where segmental results are available, adjustment can be made only on basis of individual transaction and not on aggregation [S.92E]

Held that Indian Transfer Pricing guidelines issued by Institute of Chartered Accountants of India vide guidance note on report under section 92E by ICAI and transfer pricing guidelines issued by OECD do not prohibit foreign AE to be a tested party. Therefore, where on consideration of FAR profile of both Assessee Company and AE, Tribunal held that Assessee Company was a more complex entity when compared to its foreign AE, said foreign AE could be selected as a tested party. Order of Tribunal is affirmed. Court also held that, where segmental results are available, adjustment can be made only on basis of individual transaction and not on aggregation basis. (AY. 2012-13, 2013 -14)

PCIT v. Almatis Alumina (P.) Ltd. [2022] 445 ITR 632 / 286 Taxman 378 / 214 DTR 185/ 326 CTR 849 (Cal)(HC)

190. S. 115JB : Book profit – Electricity Company – Company engaged in generation and supply of electricity – Not required to prepare its profit and loss account and balance sheet as per Parts II and III of Schedule VI of Companies Act – Provision of book profit not applicable.

Dismissing the appeal of the Revenue the Court held that since assessee was governed and ruled by different Acts and Rules, it was not required to prepare its profit and loss account and balance sheet as per Parts II and III of Schedule VI of Companies Act; hence, provisions of section 115JB could not be invoked. Order of Tribunal affirmed. (AY. 2010-11)

PCIT v. Atria Power Corporation Ltd. (2022) 138 taxmann.com 270 (Karn)(HC)

Editorial: SLP granted to Revenue; PCIT v. Atria Power Corporation Ltd. (2022) 286 Taxman 636 (SC)

191. S. 115JB: Book profit – Statutory Corporation – Provision is not be applicable to a statutory corporation constituted by notification of State of Kerala. [Electricity Supply Act, 1948, S. 5]

Dismissing the appeal of the Revenue the Court held that provision is not be applicable to a statutory corporation constituted by notification of State of Kerala, pursuant to powers vested in it by virtue of section 5 of Electricity Supply Act, 1948. Followed Kerala State Electricity Board Dy. CIT (2010) 329 ITR 91 / (2011) 196 taxman 1 (Ker)(HC) (AY. 2006-07 to 2009-10)

PCIT v. Kerala State Electricity Board (2022) 137 taxmann.com 85 (Ker)(HC)

Editorial: Supreme Court has dismissed case filed the department and held the High Court Order (2022) 447 ITR 193 (SC)

192. S. 115JB: Book profit – Retention money – Not to be included in computing book profits.

Dismissing the appeal of the Revenue the Court held that retention money is not to be included in computing book profits. Followed CIT v. Simplex Concrete Piles (India) (P.) Ltd. (1989) 179 ITR 8 (Cal)(HC). (AY. 2013-14)

PCIT v. MC Nally Sayaji Engineering Ltd. (2022) 286 Taxman 673 (Cal)(HC)

193. S. 139: Return of income – Difficulties in uploading Audit report – Revenue was directed to attend the technical glitches in portal at the earliest Art. 226]

Writ petition was filed on account of technical glitches in the Portal which the Chartered Accountants are facing and difficult to up load the audit report. The High Court directed the Revenue to attend the technical glitches in portal at the earliest.

Chartered Accountants Association v. UOI (2022) 286 Taxman 116 (Guj)(HC)

194. S. 143(2) : Assessment – Notice – Transfer from ITO, Ward-3 to ITO, Ward-4 – Order passed by ITO, Ward-4 without issuing notice under section 143(2) of the Act – Order is null and void [S.120, 143(3)]

The case of assessee was transferred from jurisdiction of ITO, Ward-3 to ITO, Ward-4 . ITO, Ward-4 who had jurisdiction over assessee during relevant assessment year framed scrutiny assessment under section 143(3). Tribunal held that the order was passed only in pursuance to notice under section 143(2) which was issued by ITO, Ward-3 who had no jurisdiction over assessee at relevant time, since no notice was issued under section 143(2) by ITO, Ward-4, assessment order passed by him would be without any jurisdiction and would be null and void. (AY. 2007-08)

PCIT v. Nopany & Sons (2022) 286 Taxman 388 (Cal)(HC)

195. S. 144B: Faceless Assessment – Cash credits – Video conferencing Natural justice – Opportunity of hearing – Matter remanded to Assessing Officer to pass a speaking order on [Art.226]

Assessee challenged the order on the ground of violation of principles of natural justice inasmuch as though it requested Assessing Officer to permit it to participate through Video Conferencing but said facility was not extended. Court held that since the order had been passed without giving an opportunity of personal hearing through Video Conferencing the order was quashed and matter remanded. (AY. 2018- 19)

Arun Excello Foundations v. NFAC (2022) 445 ITR 642 / 286 Taxman 574 (Mad.)(HC)

196. S. 144B : Faceless Assessment – Best judgment assessment – Natural justice – Directed to afford due opportunity of hearing before passing final assessment order – Reassessment – Notices were set aside – Directed to consider objections and pass the order giving an opportunity of hearing [S. 144 147, 148, 156, 270A, Insolvency and Bankruptcy Code, 2016, Art. 226]

On a writ petition against the orders passed under section 144 read with section 144B and section 270A, the demand notice under section 156 of the Income-tax Act, 1961 for the assessment year 2018-19 on the grounds that they had been passed without granting the assessee an opportunity of personal hearing and without considering the legal effect of the assessee having emerged out of the corporate insolvency resolution process under the provisions of the Insolvency and Bankruptcy Code, 2016 and the reassessment notices issued under section 148 for the assessment years 2013- 14 to 2017-18. The court set aside the orders passed under section 144 read with section 144B and section 270A and the demand notice issued under section 156 of the Income-tax Act, 1961 for the assessment year 2018-19 and remanded the matters to the Assessing Officer for giving an opportunity of personal hearing to the assessee before passing the final order. In respect of the notices issued under section 148 for the assessment years 2013-14 to 2017-2018, the Assessing Officer was to consider the objections raised by the assessee giving an opportunity of hearing. Matter remanded.( AY.2013-14 to 2018- 19)

Vadraj Energy (Gujarat) Ltd. v. ACIT (2022) 445 ITR 15 (Bom)(HC)

197. S. 144B : Faceless Assessment – Natural justice – Opportunity of hearing – High Court set aside assessment for de novo consideration, with a direction to concerned authority to pass assessment order and strictly comply with mandatory provisions prescribed under section 144B, considering all submissions made by assessee and also granting a personal hearing [S. 143(3), 144B(7), Art. 226]

Assessee filed writ petition challenging faceless assessment order on ground that opportunity of personal hearing was not granted. High Court set aside assessment for de novo consideration, with a direction to concerned authority to pass assessment order and strictly comply with mandatory provisions prescribed under section 144B, considering all submissions made by assessee and also granting a personal hearing.

Praful M. Shah v. NAFC (2022) 136 Taxmann.com 295 (Bom)(HC)

Editorial: Notice issued in SLP filed by assessee, Praful M. Shah v. NAFC (2022) 286 Taxman 263 (SC)

198. S. 144B : Faceless Assessment – Advance received from clients – For failure to file proper reply the assessment was made by making huge addition – On writ the order was quashed subject to assessee depositing a sum of Rs 5 crores – Directed the assessee to file reply in reassessment proceedings. [S. 69A, 143, Art. 226]

The asseessee is an IATA agent engaged in booking tickets for its clients received advances from clients for being paid to various airlines. The Assessing Officer added made addition u/s 69A of the Act treating the advances as unexplained investment for failure to respond any of the notices. On writ the assessee contended that two officers handling accounts and tax related issue had left assessee and thus the assessee could not reply to notices. It was also contended that the assessee will have to wound up if order remained. High Court quashed the order subject to assessee depositing a sum of Rs 5 crores – Directed the assessee to file reply in reassessment proceedings (AY. 2018 -19)

Hermes I Tickes (P) Ltd v. Dy. CIT (2022) 286 Taxman 18 (Mad)(HC)

199. S. 144B: Opportunity of personal hearing – Must be exercised judiciously especially in high stakes matters. [Article 226 of the Constitution of India, 1950]

Opportunity of personal hearing must be granted to the assessee in certain circumstances (high stakes matters) and at the same time the revenue must ensure that the assessment order is not a replica of the draft assessment order. Hence, the assessment order is quashed with a direction to reframe the order. (R/Special Civil Application No. 7461 of 2021 decided on 24.1.2022)(AY: 2018-2019)

Dastan Residency (Through Joga Singh Kalra) v. National E-Assessment Centre [2022] 446 ITR 571 (Guj)(HC)

200. S. 144C: Reference to dispute resolution panel – Draft assessment order – Limitation – No objection raised by assessee – Assessment order passed on 27-9-2021 – Barred by limitation [Art. 226]

Allowing the petition the Court held, that the Deputy Commissioner had passed the draft assessment order dated April 19, 2021 under section 143(3) read with section 144C of the Act proposing to make an addition. By letter dated May 15, 2021, forwarded to him by e-mail on May 17, 2021, the assessee informed him that it would not be opting for the Dispute Resolution Panel route and instead would pursue the normal appellate channel. The communication was received by the Deputy Commissioner on May 17, 2021 and therefore, the time limit under sub-section (4) of section 144C of the Act would expire on June 30, 2021.

Even if the submission of the Deputy Commissioner that e-mail dated May 17, 2021 was not uploaded in the Income- tax Business Application system were accepted and that the e-mail had to be ignored, still, the draft order having been received by the assessee on April 19, 2021, the thirty day period provided under sub-section (2) of section 144C of the Act would have expired on May 18, 2021 which would mean the time limit under sub-section (4) of the Act expired on June 30, 2021. On facts the order had been passed on September 27, 2021. Neither Circular No. 8 of 2021 nor Notification No. 74 of 2021 dated June 25, 2021 ([2021] 435 ITR (St.) 24) or press release dated June 25, 2021 would help the Deputy Commissioner. The assessment order dated September 27, 2021 had been passed beyond prescribed time limit. Order was quashed. (AY.2015-16)

Renaissance Services Bv v. Dy. CIT (IT) (2022)445 ITR 27 (Bom)(HC)

201. S. 145: Method of accounting – Records were destroyed by fire – Rejection of books of account not justified. [S. 133A]

Dismissing the appeal of the Revenue the Court held that in course of search conducted at business premises of assessee survey team had seized electronic data and other records but there was no finding that any entry therein was false or fabricated and the assessee was able to substantiate with official records to show that there was a fire accident in said premises which had destroyed records. Order of Tribunal is affirmed. (AY. 2004 -05 to 2010-11)

PCIT v. Inland Road Transport Ltd. (2022) 286 Taxman 613 (Cal)(HC)

202. S.147: Reassessment – After the expiry of four years – Audit objection – Security deposit – Interest expenditure – Change of opinion – Reassessment was quashed .[ S. 37(1), 148, Art. 226]

Allowing the petition the Court held that basis for reopening assessment was merely audit objections relying on the documents already filed before the Assessing Officer. There was no failure on part of assessee to truly and fully disclose facts, it could not be said that Assessing Officer had reasons to believe that income had escaped assessment. Reassessment was quashed. The AO cannot take recourse to reopen to remedy the error resulting from his own oversight relied Gemmeni Leather Stores v. ITO (1975) 100 ITR 1 (SC)) (AY. 2012 -13)

Glaxosmithkline Pharmaceuticals Ltd. v. ACIT (2022] 286 Taxman 324 (Bom)(HC)

203. S.147: Reassessment – After the expiry of four years – Provision for sales and operating expenses – No failure to disclose material facts – Reassessment notice was not valid [S. 148, 226]

Allowing the petition the Court held that the assessee provided all details called for including breakup of various expenses like provisions for sales return and other operating expenses and assessment was completed accordingly. All points, which had been raised in reasons for reopening, were raised by Assessing Officer during original assessment proceedings and all documents and details were provided to Assessing Officer .Reassessment notice was not valid. (AY. 2012-13)

Halite Personal Care India (P.) Ltd. v. DCIT (2022) 286 Taxman 464 (Bom)(HC)

204. S.147: Reassessment – After the expiry of four years – Rate of depreciation – Software licence – Audit information – Reassessment notice was quashed [ S. 32, 148, Art. 226]

Reassessment notice was issued on the ground that excess claim of depreciation was made by assessee at rate of 60 per cent in respect of software licences instead of 25 per cent. On writ allowing the petition the Court held that identical objection, as raised in reasons for reopening, was raised and communicated to assessee by way of audit queries and assessee had provided clarifications to Assessing Officer. Reassessment notice was quashed. (AY. 2012-13)

Maharashtra State Power Generation Company Ltd. v. DCIT (2022) 286 Taxman 333 (Bom)(HC)

205. S.147: Reassessment – After the expiry of four years – Business expenditure – Leased assets – Repurchase expenses – No failure to disclose material facts- Reassessment notice is not valid [S. 37(1), 148, Art. 226]

Held that during course of scrutiny assessment, Assessing Officer had made specific query as regards leased assets repurchase expenses and solicited explanation and documents and in compliance thereto, assessee furnished requisite information and documents. Once it becomes evident that Assessing Officer had raised query and reply thereto was furnished by assessee, endeavour on part of revenue to reopen assessment is fraught with two infirmities, namely, it cannot be said that income escaped assessment on account of failure to make a true and full disclosure of material facts (in cases where proviso operates) and reassessment would then fall in realm of mere change of opinion on basis of very same material, which is legally impermissible. Reassessment notice was quashed. (AY. 2006-07)

Mangalore Refinery and Petrochemicals Ltd. v. DCIT (2022) 286 Taxman 607 (Bom)( HC)

206. S.147: Reassessment – After the expiry of four years – Capital gains – No failure to disclose material facts – Reassessment notice was quashed [S. 45, 54, 148, Art. 226]

Allowing the petition the Court held that a specific query during the assessment proceedings was raised calling upon the assessee to provide a statement of capital gains and exemptions claimed along with evidence supporting the claim of exemption by a notice. The assessee provided all the details including a copy of the sale agreement. Subsequently, the assessee provided further details. Thereafter, the Assessing Officer issued a fresh notice under section 142(1) of the Income-tax Act, 1961 seeking further details on the immovable properties owned by the assessee. These details were also provided. In the assessment order, accepting the assessee’s explanations and return of income, it was mentioned specifically that benefit of deductions and exemption under section 54 of the Act was one of the reasons for scrutiny under computer assisted scrutiny selection and the assessee was issued notices and the assessee also provided all details online. Therefore, all the material relied upon by the new Assessing Officer proposing the reopening were available with the Assessing Officer when the assessment order dated December 15, 2018 was passed. Exemption had been granted. Reassessment notice was quashed. (AY.2016-17)

Gagan Omprakash Navani v. ITO (2022) 445 ITR 147 (Bom)(HC)

207. S.147: Reassessment – After the expiry of four years – Capital gains – No failure to disclose material facts – Reassessment notice was quashed [S. 45, 54, 148, Art. 226]

Allowing the petition the Court held that a specific query during the assessment proceedings was raised calling upon the assessee to provide a statement of capital gains and exemptions claimed along with evidence supporting the claim of exemption by a notice. The assessee provided all the details including a copy of the sale agreement. Subsequently, the assessee provided further details. Thereafter, the Assessing Officer issued a fresh notice under section 142(1) of the Income-tax Act, 1961 seeking further details on the immovable properties owned by the assessee. These details were also provided. In the assessment order, accepting the assessee’s explanations and return of income, it was mentioned specifically that benefit of deductions and exemption under section 54 of the Act was one of the reasons for scrutiny under computer assisted scrutiny selection and the assessee was issued notices and the assessee also provided all details online. Therefore, all the material relied upon by the new Assessing Officer proposing the reopening were available with the Assessing Officer when the assessment order dated December 15, 2018 was passed. Exemption had been granted. Reassessment notice was quashed. (AY.2016-17)

Gagan Omprakash Navani v. ITO (2022)445 ITR 147 (Bom)(HC)

208. S. 147: Reassessment – After the expiry of four years – Bad debts – Change of opinion – No tangible material – Reassessment was quashed [S. 36(1)(vii), 148]

Dismissing the appeal of the Revenue the Court held that reassessment proceedings had been initiated without any tangible material evidence, unearthed subsequently, which assessee did not produce at time of original assessment under section 143(3) of the Act. Reassessment proceedings were based on change of opinion hence the Tribunal was right in allowing appeal filed by assessee. (AY. 1998-99)

CIT v. Trichy Steel Rolling Mills Ltd. (2022) 286 Taxman 595 (Mad.)(HC)

209. S. 147 : Reassessment – With in four years – Interest free loans to sister concern – Charge of interest – Change of opinion – Reassessment notice was quashed [S. 36(1)(iii), 148, Art. 226]

Held that issue of loan being given to group companies either at low interest rate or no interest rate was a subject matter of consideration by Assessing Officer during original assessment proceedings and assessee had provided party wise details along with address of parties to whom loans/advances were given and interest received on such loans and nature of loans/advances had been considered in assessment order, reopening of assessment by Assessing Officer on ground that interest should be charged at 12 per cent per annum on loan given to sister concern and therefore this interest income had escaped assessment, being a mere change of opinion on very same material, was not justified. Reassessment notice was quashed. (AY. 2017-18)

Parinee Realty (P.) Ltd. v. ACIT (2022] 286 Taxman 337 (Bom)(HC)

210. S. 147 : Reassessment – With in four years – Depreciation – Information from Directorate of Income Tax, Intelligence & Criminal Investigation – Goodwill, trademarks and patents and Brands – Reopening of assessment on basis of very same material to take a different view was not justified – Reassessment notice was quashed [S. 32, 148, Art. 226]

Assessment was sought to be reopened in case of assessee on ground that revenue received certain information from Directorate of Income Tax, Intelligence & Criminal Investigation, Chennai, from where it was found that acquisition of Brands and Goodwill as claimed by assessee was incorrect and said transfer had not been established and thus, assessee had claimed incorrect depreciation. On writ allowing the petition the Court held that facts pertaining to acquisition of Goodwill, trademarks and Patents and Brands were not only available before Assessing Officer at time of original assessment, but were also analysed by him during course of assessment proceedings. Assessing Officer after considering all points passed assessment order, accepting fact that transfer had been established and there was proper acquisition of Brands and Goodwill, as claimed by assessee. Hence where on consideration of material on record, one view was conclusively taken by Assessing Officer, it would not be open to reopen assessment based on very same material with a view to take another view. Notice for reassessment was quashed. (AY. 2012-13)

Preethi Kitchen Appliances (P.) Ltd. v. ACIT (2022) 286 Taxman 483 (Bom)(HC)

211. S. 147 : Reassessment – With in four years – Speculative transactions – loss of cancellation of forward contract – Change of opinion – Reassessment notice was quashed [S. 43(5), 148, Art. 226]

The Assessing Officer sought to reopen assessment in case of assessee as on verification of records, he observed that Schedule 31 in profit and loss account showed that assessee company had debited a sum of Rs. 1070.42 lakhs towards ‘net loss of cancellation of forward contract’ . According to Assessing Officer, this amount of Rs. 1070.42 lakhs was speculation loss and should not have been allowed against regular business income. On writ the Court held that all these details were available before Assessing Officer who passed assessment order and between date of order of assessment sought to be reopened and date of formation of opinion by Assessing Officer, nothing new had happened. It was merely a fresh application of mind by a different Assessing Officer to same set of fact. Accordingly the notice for reopening assessment and order passed disposing of objections was quashed and set aside. (AY. 2012- 13)

Parle Products (P.) Ltd. v. ACIT (2022) 286 Taxman 235 (Bom)(HC)

212. S. 147 : Reassessment – With in four years – Sale of shares – Business income – Capital gains – Change of opinion – Reassessment notice was quashed [S. 28(i), 148, 154 226]

Assessing Officer passed assessment order under section 143(3) dated 31-12-2007. Rectification order under section 154 dated 6-5-2009 was also passed. Subsequently assessment was reopened and order under section 143(3) read with section 147 dated 18-12-2009 was passed. Thereafter assessee received a notice dated 31-3-2010 under section 148 from Assessing Officer alleging that he had reason to believe that assessee’s income chargeable to tax for assessment year 2005-06 had escaped assessment within meaning of section 147 of the Act. Assessing Officer also rejected assessee’s objections to reopening On writ allowing the petition the Court held that the entire basis of forming an opinion that there had been an escapement of assessment was that profit arising out of sale of shares by assessee was nothing but business income and, therefore, profit arising out of sale of shares held by assessee in group companies would be treated as assessee’s income from business and not profit arising out of sale of investment – It was also noted that in assessment order dated 31-12-2007 passed under section 143(3) same point raised in reasons for reopening had been discussed and considered . Reassessment notice on basis of change of opinion which could not be a ground for reopening. Reassessment notice was quashed. (AY. 2005-06)

Tata Sons Ltd. v. CIT (2022) 286 Taxman 587 (Bom)(HC)

213. S. 147: Reassessment – Bad debt – Rural branch – Withdrawal of claim in subsequent year – Reassessment is not valid [S. 36(1) (viia), Art. 226]

During assessment, Assessing Officer sought clarification on allowability of claim u/s 36(1(viia) of the Act. The claim was allowed. The Assessing Officer proposed to reopen assessment on ground that during assessment proceedings for assessment year 2010-11 when assessee was called upon to submit details of rural branches and advances, assessee had withdrawn claim for deduction under section 36(1)(viia) of the Act hence the assessee was likely to have claimed incorrect deduction as many branches initially projected as rural branches were not rural branches as prescribed in Explanation (ia) to clause (viia)of the Act. On writ the Court held that since specific queries were raised related to allowability of deduction under section 36(1)(viia) and upon consideration of same claim was allowed for relevant assessment year, reassessment on premise that it was likely that assessee claimed incorrect deduction in past assessment year without any tangible material would be in nature of guess. Accordingly the notice for reassessment was to be quashed. (AY. 2006 -07)

HDFC Bank Ltd. v. ACIT (2022) 445 ITR 196 / 286 Taxman 365 (Bom)(HC)

214. S. 147: Reassessment – Speaking order – Order passed without passing a speaking order – Order was set aside – Directed to pass speaking order [S. 143(3), 148, Art. 226]

Allowing the petition the Court held that once a notice under section 148 was issued and reasons were given thereafter, it was incumbent on part of revenue to have passed a speaking order. Accordingly the reassessment order passed by Assessing Officer was to be set aside and remanded back to Assessing Officer to pass a speaking order. (AY. 2011-12) (SJ)

Fast Finance (P) Ltd v. ACIT (OSD) (2022) 286 Taxman 455 (Mad.)(HC)

215. S. 147 : Reassessment – Capital gains – Profit on sale of property used for residence – Investment in six residential flats – Change of opinion – Reassessment is not valid [S. 45, 54, 148, Art. 226]

Assessee claimed exemption under section 54 which was allowed. Thereafter, a notice under section 148 was issued to assessee on ground that documents relating to acquisition of new property showed that it related to six residential flats and since under section 54, exemption is not allowed if assessee purchases more than one residential house from capital gain accrued from sale, assessee was not eligible for section 54 exemption. On writ allowing the petition the Court held that the assessee had provided all evidences to justify that when he purchased flat, it was one residential unit and that issue of deduction under section 54 was a subject matter of consideration by Assessing Officer during assessment proceedings. Accordingly the reopening of assessment was quashed on the ground of change of opinion. (AY. 2016-17)

Gagan Omprakash Navani v. ITO (2022) 286 Taxman 668 (Bom)(HC)

216. S. 147: Reassessment – Failure to show remuneration and interest on capital received from partnership firm – Reassessment notice was quashed [S.28 (i), 148, Art. 226]

Assessee was a partner in a firm. Assessing Officer reopened assessment on ground that she failed to show remuneration and interest on capital received from partnership firm in return of income filed. Assessee filed objections pointing out that she had not received any income in form of remuneration and interest on capital from partnership firm and, therefore, there was no question of adding such income or showing such income in return of income. Assessing Officer disposed of objections raised by assessee on ground that assessee had received share of profit from firm and such share received by assessee as per partnership deed would include remuneration and interest on capital which had not been debited from profit and loss account of firm On writ the Court held that Tribunal while deciding appeal of aforesaid partnership firm in respect of assessment year 2011-12 adjudicated controversy as regards deduction of remuneration and interest on partners’ capital not claimed by partnership in its profit and loss account and held that there was no good ground to tax remuneration and interest on capital in hands of partners. Accordingly the reopening of assessment was quashed and set aside. (AY. 2006-07)

Mamta Bhavesh Deva v. ITO (2022) 286 Taxman 692 (Guj)(HC)

217. S.148: Whether notices issued for AY 2013-2014, 2014-2015, 2015-2016 are within limitation if case is not covered under Section 149(1) (b). [S.149 of the Income Tax Act, 1961]

In view of the statement of the ld. Additional Solicitor General and paragraphs 6.2 and 7.1 of the Boards Circular dated 11.5.2022 and since the case does not attract Section 149(1) (b), the notices issued under Section 148 for the AY’s 2013-2014, 2014-2015, 2015-2016 would be beyond limitation and liable to be quashed. (Writ Tax No. 347 of 2022 decided on 17.5.2022) (AY: 2014-2015)

Ajay Bhandari v. UOI [2022] 446 ITR 699 (All) (HC)

218. S. 148 : Whether notice issued to a dead person is valid when the person has merged/amalgamated with another company and has ceased to exist

In view of the decision of the Supreme Court in Maruti Suzuki it is clear that a notice cannot be issued to a person that does not exist and such a defect is not a curable defect as per the provisions of Section 292BB of the Act when the AO had knowledge that the noticee had ceased to exist due to amalgamation and has issued notice under Section 148 highlighting the same.(Writ Petition No. 2742 of 2019 decided on 10.8.2021)(AY: 2012-2013)

Alok Knit Exports Ltd. v. Dy. CIT [2022] 446 ITR 748 (Bom)(HC)

219. S. 148: Notice issued under Section 148 is valid if assessee has failed to fully and truly disclose material facts necessary for assessment (S. 147)

If the assessee fails to fully and truly disclose material facts, the factum of producing account books and other documents before the AO simplicitor would not amount to full and true disclosure. In view of fresh information received from the investigation wing it cannot be said that the assessee has made a full and true disclosure during assessment proceedings nor can it be said review is taking place when no ‘opinion’ has been formed in the first place. (Writ Tax No. 48 of 2022 decided on 11.4.2022)

(AY: 2013-2014)

Ambuj Foods Pvt. Ltd. v. Pr. CIT [2022] 446 ITR 294 (All)(HC)

220. S. 148: Reopening of assessment – No change of opinion if matter not examined during assessment proceedings – No need to examine suppression of material facts at the writ stage – there is prima facie information with the AO that income chargeable to tax has escaped assessment. [Section 147 of the Income Tax Act, 1961]

The AO had not formed any opinion about payments made to the assessee in the form of reimbursement of expenses during the assessment proceedings. Hence there is no change of opinion. The AO had prima facie reason to believe income chargeable to tax has escaped assessment and whether or not there was failure to disclose cannot be examined before the high court in writ jurisdiction.(Writ Tax No. 41 of 2022 decided on 18.4.2022)

Distributors India (South) v. UOI [2022] 446 ITR 163 (All)(HC)

221. S.148: Reopening of assessments – Where income is alleged to have escaped assessment in absence of jurisdictional infirmity matter to be adjudicated by AO.

It is for the assessee to produce books of account, documents and other evidence before the AO for him to adjudicate whether income has escaped assessment and no interference is called for when there is no jurisdictional infirmity in the reopening notice.(W.P. Nos. 5597, 5609 of 2022, W.M.P. Nos. 5695, 5699, 5701 and 5702 of 2022 decided on 16.3.2022)(AY: 2013-2014;2015-2016)

Bengal Tiger Line (India) Pvt. Ltd. v. Dy. CIT [2022] 446 ITR 331 (Mad)(HC)

222. S. 150 : Assessment – Order on appeal – Reassessment – Deemed dividend – Addition deleted – Finding – Direction – Left open for the Assessing Officer in the hands of shareholders – Order cannot be construed as direction [S. 147, 148, 153, Art. 226]

Commissioner (Appeals) passed an order deleting addition of deemed dividends and left it open for Assessing Officer to make assessment of such deemed dividend in hands of petitioner shareholders of assessee-company. The Assessing Officer issued notice under section 150 of the Act on the ground that the order of CIT(A) contained the direction as contemplated u/s 150 of the Act. On writ allowing the petition the Court held that the said order could not be said to have issued any directions as contemplated under section 150 of the Act. Court als0 observed that the finding in order of Commissioner (Appeals) was recorded without granting petitioners an opportunity of being heard, accordingly the reopening notices issued on basis of said order by invoking provisions of section 150 were quashed. (AY. 2010-11)

Dinar Tarcar v. ACIT (2022) 286 Taxman 638/ 213 DTR 57/ 326 CTR 310 (Bom.)(HC)

223. S. 153C: Assessment – Income of any other person – Search – Violation of principle of natural justice – Responded to notice – Order was set aside [S.132, 142(1), Art. 226]

A notice under section 153C was issued calling upon assessee to submit return in accordance with section 140 within one day .On very next day notice under section 142(1) had been issued calling upon assessee to respond within two days. Assessee, notwithstanding short time, responded by way of a trail mail, however order under section 153C had been made by saying that assessee had not responded to section 142(1) notice of the Act. On writ allowing the petition the Court held that section 142(1) notice and response to same is so integral a part of assessment that it cannot be given a go-by and violation of same certainly qualifies as violation of principle of natural justice. Further since impugned orders proceeded with assessment saying that assessee had not responded though assessee had responded notwithstanding short time given for responding, there was violation of principle of natural justice and, therefore the order was set aside. (AY. 2017-18, 2018-19, 2019 -20) (SJ)

PCIT v. PraveenKumar Pathi (2022) 286 Taxman 458 (Mad)(HC)

224. S. 194A: Deduction at source – Interest other than interest on securities – Compensation awarded by Motor Accident Claims Tribunal (MACT) – Compensation exceeded 50 thousand – Tax deducted and deposited – MACT could not have directed Insurance Company to pay said amount yet again for its payment to claimants. [S.194A (ix), Art, 226]

Held that where interest component on compensation awarded by Motor Accident Claims Tribunal (MACT) exceeded Rs. 50 thousand and, Insurance Company deducted TDS and deposited same with Central Government, it had carried out mandate of clause (ix) of section 194A and had not committed any illegality, thus, MACT could not have directed Insurance Company to pay said amount yet again for its payment to claimants.

Bajaj Allianz General Insurance Co. Ltd. v. M.A.C.T. Kathua (2022) 286 Taxman 98 (J & K and Ladakh)(HC)

225. S.194IC: Deduction at source – Payment under specified agreement Compensation received on Acquisition of Land for Public Project under an agreement – Award – Assessee not specific person under Section 46 – Compensation received not liable to Deduction of tax at source

– Deductor to file correction statement of Tax Deducted – Department to process statement

– Tax Deducted at source to be refunded [S. 139, 194L, 199, 200(3), 200A(d), 237, Rule 37BA(3)(i),

Right to Fair Compensation and Transparency in land Acquisition, Rehabilitation and Resettlement Act, 2013 S. 46, 96, Art. 226]

NHRCL acquired the land of the assessee purportedly under an agreement and deducted tax at source from the compensation paid. Thereafter, a supplementary deed was entered into between the assessee and the NHRCL under which some additional amount was paid to the assessee and tax was deducted from that part of the compensation also. The assessee requested NHRCL to reverse the

tax deducted on the ground that no tax was deductible. NHRCL replied that exemption from tax was not applicable to the compensation on the land acquired from the assessee and that the tax deducted from the payment made to the assessee was duly deposited with the Department. According to the assessee her income was exempted from tax and she could not fill Schedule TDS-2 and hence could not make an application under section 199 of the 1961 Act read with rule 37BA(3)(i) of the Income-tax Rules, 1962 whereas according to NHRCL the assessee had to file a return and claim refund. On a writ allowing the petition the Court held that the income received by the assessee on account of the property acquired by NHRCL by private negotiations and sale deed was exempted from tax. According to the public notice issued for acquisition of land through direct purchase and private negotiations by the office of the Sub-Divisional Officer for implementing the project, while purchasing the land directly for the project the compensation would be fixed by giving 25 per cent. Enhanced amount of the total compensation being calculated for the land concerned in terms of the provisions of sections 26 to 33 and Schedule I to the 2013 Act. Undisputedly, the land was acquired for a public project. A policy decision had been taken by the State Government under its Government Resolution dated May 12, 2015 for acquiring the property by private negotiations and purchases for implementation of public project. The methodology was also provided. The computation of compensation had to be under the provisions of the 2013 Act which was introduced to expedite the acquisition for the implementation of the project. If the parties would not agree with the negotiations and direct purchase, then compulsory acquisition under the provisions of the 2013 Act had to be resorted to. The 2013 Act also recognised the acquisition through an agreement. NHRCL was not a specified person within the meaning of section 46 of the 2013 Act and the provisions of the section would not be attracted. Therefore, since the exemption under section 96 of the

2013 Act would apply and no tax can be levied on the amount of compensation NHRCL should not have deducted tax from the amount of compensation paid to the assessee. Balakrishnan v. UOI (2017) 391 ITR 178 (SC) and VIswanathan M. v. CCIT WP (C) No. 3227 of 2020, dated 18- 2-2020 relied on. Court also held that it was not possible for the court to arrive at a conclusion as to whether the assessee was required to file return or not. NHRCL had already deducted tax which it ought not to have been deducted. Therefore, (i) NHRCL should file a correction statement as provided under the proviso to sub-section (3) of section 200 of the 1961 Act to the effect that the tax deducted by it was not liable to be deducted, (ii) the Department shall process the statement including the correction statement that might be filed under section 200A more particularly clause (d) thereof and (iii) the parties should thereafter take steps for refund of the amount in accordance with the provisions of the 1961 Act and the 1962 Rules. Circular No. 36 of 2016, dated October 25, 2016 (2016) 388 ITR (St.) 48)

Seema Jagdish Patil v. National Hi-Speed Rail Corporation Ltd. (2022)445 ITR 382 (Bom)(HC)

226. S. 195 : Deduction at source – Non-resident – Foreign companies – Equalization levy – Direction to deduct tax at source 10 percent – When the assessee is subjected itself to Equalization Levy of 2 per cent on payments under consideration, as an interim measure, assessee would be entitled to receive its payment from GCI subject to a deduction of 8 per cent- DTAA [S.115JA, 166, 195(2), 226]

On the application made by the appellant for lower deduction of tax, the certificate was issued under section 195(2) of the Act, directing payer company, Google Cloud India Pvt Ltd (GCI) to deduct tax at source at rate of 10 percent at time of making payment to assessee as per provision of section 115A read with DTAA. The appellant contended that since it had already subjected to Equalisation Levy of 2 percent on payment, withholding certificate a double jeopardy. On writ the Court held that since the appellant had already subjected itself to Equalization Levy of 2 per cent on payments under consideration, withholding certificate creates a double jeopardy by asking GCI to withhold tax at rate of 10 per cent, thus, without prejudice to rights and contentions, appellant be permitted to receive remittances, after suffering a withholding of only 8 per cent . Court held that purely as an interim measure, assessee would be entitled to receive its payment from GCI subject to a deduction of 8 per cent and that deposit of 8 per cent shall not be treated as any non-compliance of impugned order under section 195(2). (AY. 2022 -23)

Google Asia Pacific Pte. Ltd. v. CIT (2022) 286 Taxman 592/ 211 DTR 175/ 325 CTR 249 (Delhi) (HC)

227. S. 195 : Deduction at source – Non-resident – Foreign companies  – Equalization levy – Direction to deduct tax at source 10 percent – When the assessee is subjected itself to Equalization Levy of 2 per cent on payments under consideration, as an interim measure, assessee would be entitled to receive its payment from GCI subject to a deduction of 8 per cent-DTAA [S.115JA, 166, 195(2), Art. 226]

On the application made by the appellant for lower deduction of tax, the certificate was issued under section 195(2) of the Act, directing payer company, Google Cloud India Pvt Ltd (GCI) to

deduct tax at source at rate of 10 percent at time of making payment to assessee as per provision of section 115A read with DTAA. The appellant contended that since it had already subjected to Equalisation Levy of 2 percent on payment, withholding certificate a double jeopardy. On writ the Court held that since the appellant had already subjected itself to Equalization Levy of 2 per cent on payments under consideration, withholding certificate creates a double jeopardy by asking GCI to withhold tax at rate of 10 per cent, thus, without prejudice to rights and contentions, appellant be permitted to receive remittances, after suffering a withholding of only 8 per cent. Court held that purely as an interim measure, assessee would be entitled to receive its payment from GCI subject to a deduction of 8 per cent and that deposit of 8 per cent shall not be treated as any non-compliance of impugned order under section 195(2). (AY. 2022-23)

Google Asia Pacific Pte. Ltd. v. CIT (2022) 286 Taxman 592/ 211 DTR 175/ 325 CTR 249 (Delhi) (HC)

228. S. 195 : Deduction at source – Non-resident – Foreign companies – Equalization levy – Direction to deduct tax at source 10 percent – When the assessee is subjected itself to Equalization Levy of 2 per cent on payments under consideration, as an interim measure, assessee would be entitled to receive its payment from GCI subject to a deduction of 8 per cent- DTAA [S.115JA, 166, 195(2), 197, 226]

On the application made by the appellant for lower deduction of tax, the certificate was issued under section 195(2) of the Act , directing payer company, Google Cloud India Pvt Ltd (GCI) to deduct tax at source at rate of 10 percent at time of making payment to assessee as per provision of section 115A read with DTAA. The appellant contended that since it had already subjected to Equalisation Levy of 2 percent on payment, withholding certificate a double jeopardy. On writ the Court held that since the appellant had already subjected itself to Equalization Levy of 2 per cent on payments under consideration, withholding certificate creates a double jeopardy by asking GCI to withhold tax at rate of 10 per cent, thus, without prejudice to rights and contentions, appellant be permitted to receive remittances, after suffering a withholding of only 8 per cent. Court held that purely as an interim measure, assessee would be entitled to receive its payment from GCI subject to a deduction of 8 per cent and that deposit of 8 per cent shall not be treated as any non-compliance of impugned order under section 195(2). (AY. 2022-23)

Google Asia Pacific Pte. Ltd. v. CIT (2022) 286 Taxman 592/ 211 DTR 175/ 325 CTR 249 (Delhi) (HC)

229. S. 197 : Deduction at source – Certificate for lower rate – Dividend – Rate of tax – Dividend received by a Switzerland based company from Indian company- Lower withholding tax rate of 5 per cent instead of 10 per cent in view of MFN clause – DTAA -India-Switzerland. [S. 9(1)(iv), Art. 10, Art. 226]

Assessee filed an application under section 197 before Assessing Officer seeking to issue a certificate authorising assessee to receive dividend income from an Indian company subject to lower withholding tax rate of 5 per cent as applicable under India-Switzerland DTAA read with protocol and Most Favoured Nation (‘MFN’) clause. Application was rejected and directed to deduct tax at rate of 10 percent. On writ the Court held that the dividend received by a Switzerland based

company from Indian company will bear a lower withholding tax rate of 5 per cent instead of 10 per cent in view of MFN clause and DTAA between India and Switzerland and therefore, certificate prescribing rate of 10 per cent was to be set aside and a certificate under section 197 would be issued in favour of assessee indicating rate of tax on dividend as applicable upon assessee at 5 per cent.

Cotecna Inspection SA v. ITO (2022) 286 Taxman 342 (Delhi)(HC)

230. S. 201: Deduction at source – Failure to deduct or pay – Limitation – Order is barred by limitation – limitation of two years as prescribed in section 201(3), as it existed prior to its substitution by Finance Act, 2013 with effect from 1-10-2014, would [S.200, 201(3), 201(IA)]

Assessing Officer for assessment year 2009-10 initiated proceedings under section 201 and issued a notice dated 8-2-2016 to assessee for delay to deduct tax at source. Assessee objected to proceedings on ground that limitation for passing an order under section 201(1) and section 201(1A) would be two years from end of relevant financial year. The Assessing Officer rejected contention and held that section 201(3) was substituted by Finance Act, 2013 with effect from 1-10-2014 and, therefore, limitation of seven years from end of relevant financial year was applicable. Commissioner (Appeals) held that limitation prescribed under section 201(3), as it existed prior to amendment vide Finance Act, 2013, would apply hence barred by limitation. Tribunal affirmed the order of CIT (A). On appeal the High Court affirmed the and held that order passed under section 201 dated 30-3-2016 was barred by limitation. (AY. 2009-10)

ACIT v. ACER India (P)(Ltd (2022) 286 Taxman 570/ 215 DTR 35 (Karn)(HC)

231. S. 220(6) : Stay of Demand – Assessee not liable to deposit monies pursuant to assessment order when there is a failure to follow the principles of natural justice.

In view of the decision of the Supreme Court in LG Electronics, the CIT(A) being a quasi judicial authority, an amount lesser than 20% can also be demanded and there is no obligation to deposit an amount as per CBDT Circular dated 31.7.2017 i.e 20%. Failure to observe principles of natural justice would result in remand to the authority which has decided the stay application.(W.P. No. 13926 of 2022 decided on 22.4.2022)(AY: 2017-2018)

APR Jewellers Pvt. Ltd. v. CIT [2022] 446 ITR 275 (Telangana) (HC)

232. S. 245D : Settlement Commission – Settlement of cases – Procedure

– Application – Court in writ jurisdiction cannot scrutinize or re appreciate facts, evidence or findings of Settlement Commission in reaching to its conclusion for allowing claim in settlement application. [S. 245D(1), Art. 226]

The assessee-company, filed a settlement application relating to assessment year 2012-13 before the Settlement Commission for settlement of its income tax matters by disclosing certain income. The application was proceeded with under section 245 D(1) of the Act . The Settlement Commission called for a report under rule 9 of the Income-tax Settlement Commission (Procedure) Rules, 1997 from the Principal Commissioner. In the said report, the Commissioner/petitioner objected to the settlement of the case of assessee alleging that the assessee had not made true and correct

disclosure of its undisclosed income before the Settlement Commission. The petitioner also alleged that the assessee was compelled to disclose its undisclosed income arising out of unrecorded business transactions only when the existence of the same was brought to light by the survey operation and alleged that had the survey not been conducted and the documents not seized, the assessee would not have disclosed any unaccounted income voluntarily. The Settlement Commission allowed the application of assessee, holding that once the documents had been impounded in the course of survey, contents of the documents would be presumed to be true as per provisions of section 292C and once the applicant had disclosed the profit/income as per notings on those documents, any further probe or query in the matter would serve no purpose. The Revenue filed writ petition . Dismissing the petition the Court held that the petitioner could not make out any exceptional case in this writ petition for exercising constitutional writ jurisdiction of this Court under article 226 for scrutinizing or reappreciating the facts, evidence or findings of the Settlement Commission in reaching to its conclusion of allowing the claim of the assessee made in settlement application and further the Court in exercise of its constitutional jurisdiction under article 226 cannot substitute the findings of the Settlement Commission with its own findings and come to a different conclusion. The Court also observed that the petitioner could not demonstrate before the Court any legal infirmity in decision making process in course of impugned income tax settlement proceeding. Writ petition was dismissed. (W.P.O. 289 of 2017 dt. 14-9 -2021)(SJ)

PCIT v. Settlement Commission (2022) 286 Taxman 129 (Cal)(HC)

233. S. 246A : Appeal – Commissioner (Appeals) – Appealable orders – Pre-deposit – For entertaining an appeal it is not mandatory for pre deposit of tax in dispute [S. 144, 144B,220(6), 246A, Art. 226]

The petitioner filed writ against the order passed u/s 144 of the Act. High Court held that for filing an appeal before CIT (A) it is not mandatory to pre-deposit of 20% of tax in dispute. The Court also held that it is open to Assessing Authority to make a demand and the petitioner need not construe that such insisting of demand is a pre-deposit required for entertaining appeal under section 246A of the Act . The writ was dismissed.

K 553 v. Thutharipalayam Primary Agricultural Co-operative Credit Society Ltd. v. CIT (2022) 286 Taxman 677 (Mad)(HC)

234. S. 260A: Appeal – High Court – Not discussed on merits – Order of High Court set aside-Matter remanded. [Benami Property Transaction Act, 1988, S. 49]

High Court except reproduction of observations made by Tribunal, there was no further independent reasoning given by High Court and nothing had been further discussed on merits and even substantial question of law had also not been framed, order of High Court under section 260A was to be quashed and set aside and matter was to be remitted to High Court for adjudication afresh.

CIT v. State Bank of Bikaner and Jaipur (2022) 286 Taxman 569 (SC)

235. S.260A: Appeal to High Court – Expenditure incurred towards – ISO certificate revenue in nature – Subsidy received towards administrative expenses capital in nature [r.w.s. 37, 43)

Expenses towards ISO certificate is revenue in nature and receipt of subsidy towards administrative expenses incurred for developing infrastructure facilities is capital in nature. (R/Tax Appeal No. 130 of 2022 decided on 24.1.2022)(AY: 2010-2011)

CIT (Exemptions) v. Narmada Clean Tech Ltd. [2022] 446 ITR 366 (Guj)(HC)

236. S.260A : Appeal to High Court – In absence of evidence that the assessee is the owner of the wind mills no disallowance can be made towards business [S.37]

Where there was no evidence to show that the assessee was the owner of the wind mills such that amounts were received by the assessee and the same amounts were paid towards electricity charges; any amount paid by the assessee was only towards consumption charges for electricity supplied to it and was allowable as business expenditure.(T.C.A. Nos. 695 of 2009 and 1100 to 1103 of 2010 decided on 9.6.2022)(AY’s:2000- 2001; 2001-2002; 2002-2003; 2003-2004)

CIT v. Tube Investments Of India Ltd. [2022] 446 ITR 676 (Mad)(HC)

237. S. 260A: Appeal to High Court – Matter to be remanded to AO to see whether ILFS is public financial institution and then only will Section 43B be applicable. [S. 43B]

The AO has to examine whether ILFS is a public financial institution and hit by Section 43B(d) when interest payments made to ILFS would not be allowed as a deduction since it is not actually paid.(T.C.A. Nos. 1406 of 2008, 1382, 1383 of 2009, 87, 483 of 2011, 619 of 2014, 928, 929 and 941 of 2015 decided on 15.2.2022)(AY:2003-2004; 2004-2005; 2005-2006; 2006-2007; 2007-2008;2008- 2009; 2009-2010; 2010-2011; 2011-2012)

CIT v. Tamil Nadu Water Investment Co. Ltd. [2022] 446 ITR 546 (Mad)(HC)

238. S. 263: Commissioner – Revision of orders prejudicial to revenue – Share application money – Revision order is held to be valid [S. 68, 69]

Dismissing the appeal the Court held that Revision order passed by the CIT setting aside assessment order with a direction for requisite inquiries doubting said share capital raised with such high premium. Referred Pragati Financial Management (P.) Ltd. v. CIT (2017) 394 ITR 27 (Cal)(HC) and held that even under non-amended provisions of section 68 prior to insertion of proviso to section 68, which was added by Finance Act, 2012, providing for enquiry of sum credited by assessee, an Income- tax Officer was not precluded from making an inquiry as to true nature and source of sum found credited in books even if same was credited as receipt of share application money . (AY. 2009-10)

Neelkantha Commosales (P.) Ltd. v. ITO (2022) 286 Taxman 48 (Cal)(HC)

239. S. 263: Commissioner – Revision of orders prejudicial to revenue Deemed dividend – Loans and advances to shareholders – Unsecured loan from Group Company – Paid back with interest in same year – Revision is held to be not [S. 263]

Assessee received unsecured loan from its group companies during relevant assessment year. The assessment was completed u/s 143(3) of the Act. Commissioner set aside assessment order by invoking section 263 on ground that section 2(22)(e) would be applicable on loan received by assessee as same were deemed dividend and directed Assessing Officer to re-compute assessee’s income. Tribunal set aside the order on the ground that the assessee paid off loan with interest in same year itself. Furthermore,

details of shareholders holding more than 10 per cent shares were provided by assessee- company during assessment proceedings and Assessing Officer after taking into consideration all relevant documents held that section 2(22) (e) would not be applicable in case of assessee. On appeal High Court affirmed the order of Tribunal. (AY. 2012-13)

PCIT v. Suprabha Industries Ltd. (2022 286 Taxman 156 / 211 DTR 157/ 325 CTR 757 (Cal)(HC)

240. S. 264: Commissioner – Revision of other orders – Powers – Capital gains – Full value of consideration – Escrow account – Consideration received less than the amount credited in the account – Only actual consideration taxable – Power of Principal Commissioner not restricted to allowing relief only up to returned income – Re computation results in income less than returned income – Section 240 not applicable – Entitle to refund of excess tax paid [S.45, 48, 240, 264, Art. 226]

The assessee computed the capital gains on sale of shares taking into account the proportion of the total consideration which included the escrow amount which had not been received by the time returns were filed but were received by the promoters but were still parked in the escrow account. The income declared by the assessee was accepted in the scrutiny assessment. The assessee stated that subsequent to the sale of the shares certain statutory and other liabilities arose for the period prior to the sale of the shares and according to the agreement, certain amount was withdrawn from the escrow account and it did not receive the amount. The assessee filed an application under section 264 before

the Principal Commissioner and submitted that the capital gains were to be recomputed accordingly reducing the proportionate amount from the amount deducted from the escrow account and that an application under section 264 was filed since the assessment had been completed by the time the amount was deducted from the escrow account. The Principal Commissioner rejected the assessee’s application. On writ allowing the petition the Court held that that capital gains was computed under section 48 of the Act by reducing from the full value of consideration received or accrued as a result of transfer of capital asset, cost of acquisition, cost of improvement and cost of transfer. The real income (capital gains) could be computed only by taking into account the real sale consideration, i. e., sale consideration after reducing the amount withdrawn from the escrow account. The amount was neither received nor accrued since it was transferred directly to the escrow account and was withdrawn from the escrow account. When the amount had not been received or accrued it could not be taken as full value of consideration in computing the capital gains from the transfer of the shares of the assessee. The purchase price as defined in the agreement was not an absolute amount as it was subject to certain liabilities which might have arisen on account of certain subsequent events. The full value of consideration for computing capital gains would be the amount which was ultimately received after the adjustments on account of the liabilities from the escrow account as mentioned in the agreement. The liability as contemplated in the agreement should be taken into account to determine the full value of consideration. Therefore, if the sale consideration specified in the agreement was along with certain liability, then the full value of consideration for the purpose of computing capital gains under section 48 of the Act was the consideration specified in the agreement as reduced by the liability. The full value of consideration under section 48 would be the amount arrived at

after reducing the liabilities from the purchase price mentioned in the agreement. Even if the contingent liability was to be regarded as a subsequent event, it ought to be taken into consideration in determining the capital gains chargeable under section 45. Such reduced amount should be taken as the full value of consideration for computing the capital gains under section 48. If income did not result at all, there could not be a tax, even though in book keeping, an entry was made about hypothetical income which did not materialize. Therefore, the Principal Commissioner ought to have directed the Assessing Officer to recompute the assessee’s income irrespective of whether the computation would result in income being less than the returned income. CIT v. Shoorji Vallabhdas and co. (1962) 46 ITR 144 (SC), relied. Court also held that reliance by the Principal Commissioner on the provisions of section 240 to hold that he had no power to reduce the returned income was erroneous because the circumstances provided in the proviso to section 240 did not exist. The proviso to section 240 only provides that in case of annulment of assessment, refund of tax paid by the assessee according to the return of income could not be granted to the assessee. The only thing that was sacrosanct was that an assessee was liable to pay only such amount which was legally due under the Act and nothing more. Therefore, the assessee was entitled to refund of excess tax paid on the excess capital gains.

Section 264 of the Income-tax Act, 1961 does not restrict the scope of powers of the Principal Commissioner to restrict relief to an assessee only to the returned income. Where the income can be said not to have resulted at all, there is neither accrual nor receipt of income even though an entry might, in certain circumstances, have been made in the books of account.

It is the obligation of the Department to tax an assessee on the income chargeable to tax under the Act but if higher income is offered to tax, it is the duty of the Department to compute the correct income and grant the refund of taxes erroneously paid by the assessee. There is no provision in the Act which provides, if the assessed income is less than the returned income, the refund of the excess tax paid by the assessee would not be granted to the assessee. If the returned income shows a higher tax liability than what is actually chargeable under the Act, then the assessee is entitled to refund of excess tax paid by it. (AY.2011-12)

Dinesh Vazirani v. PCIT (2022) 445 ITR 110 (Bom) (HC)

241. S. 271(1)(c) : Penalty – Concealment – Cash credits – Recoding of satisfaction – Show cause notice did not indicate whether there was concealment of particulars of income or furnishing of incorrect particulars of such income – Deletion of penalty is held to be valid [S. 274]

Allowing the appeal the Court held that where show cause notice did not indicate whether there was concealment of particulars of income or furnishing of incorrect particulars of such income the levy of penalty is not valid. Followed Mohd. Farhan A. Shaikh v. Dy. CIT (2021) 434 ITR 1/ 280 Taxman 334 (Bom)(HC).(FB)

Ganga Iron & Steel Trading Co. v. CIT (2022) 286 Taxman 21 (Bom)(HC)

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